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Prime Minister Sir Keir Starmer has been warned by British business that his vaunted industrial strategy, to be published this month, will be “fatally flawed” unless it deals comprehensively with the country’s very high energy costs.
Ministers accept that high energy costs — which manufacturers claim are 46 per cent higher than the global average — must be addressed in the industrial strategy, according to government officials.
But business groups fear the government will be too timid, targeting help at only the most energy-intensive sectors — such as steel and ceramics — rather than a wider range of companies struggling with power bills.
Ministers are looking to increase the generosity of the “British Industry Supercharger” scheme, set up by Rishi Sunak’s Conservative government in April 2024, which cut bills for 370 energy-intensive companies, according to people briefed on the plans.
Rain Newton-Smith, director-general of the CBI employers’ federation, told the Financial Times: “Unless the industrial strategy delivers a solution to the UK’s high energy costs for industry, it will have failed.”
Newton-Smith said a “more comprehensive” solution had to be found, rather than just focusing on the biggest energy users, adding that the chemicals, aerospace and car industries were among those suffering most from high power bills.
Meanwhile Make UK, the manufacturing lobby group, said industrial energy costs in Britain were four times as high as those in the US and 46 per cent above the global average.
“The upcoming industrial strategy will be fatally flawed unless sky-high energy costs are tackled,” it said.
Starmer’s industrial strategy is prioritising eight “growth” sectors: advanced manufacturing, clean energy, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.
Officials close to business secretary Jonathan Reynolds said: “Johnny has said that energy is always something that comes up. He is alive to the fact that the industrial strategy needs to have some good answers on energy.”
Industry officials briefed on government thinking expect ministers to take a more generous approach to the British Industry Supercharger, which Sunak’s government said would save energy intensive users, such as steelmakers, some £410mn in 2025.
They said ministers were looking at increasing the cut in network charges for eligible companies from 60 per cent to close to the 90 per cent compensation offered by France and Germany to industrial users for these network charges.
But business groups want the reductions in energy bills to be distributed more widely, including by removing levies such as the “renewables obligation” and “climate change levy” from bills.
“If we don’t address the issue of high industrial energy costs as a priority, we risk the security of our country,” Stephen Phipson, Make UK’s chief executive said.
Alan Johnson, senior vice-president at the Japanese carmaker Nissan, said: “The Nissan Sunderland manufacturing plant has the highest energy costs of all Nissan plants across the globe.”
The industrial strategy is due to be published at around the same time as the Treasury’s comprehensive spending review on June 11.
The Department for Business and Trade declined to comment on “speculation” on the strategy’s contents.
